Wednesday, May 21, 2014

When Will Iraq Pass Its 2014 Budget?

Iraq is supposed to pass its budget by November of each
year. It is now May 2014 and there is no deal on the table to move the
legislation forward. Many provinces have complained that they have halted their
projects and can’t pay their employees because there are no funds coming from
the central government. There have even been protests over the issue. The
problem is that the political parties are caught up with the election results
and the coming negotiations to form a new government. The budget was originally
held up because Prime Minister Nouri al-Maliki wanted to punish Kurdistan for
its oil policy. The Kurdish parties then refused to show up to the legislature
to discuss the draft law, and were joined by its erstwhile ally Speaker Osama
Nujafi’s Mutahidun who is also an opponent of Maliki. There is some talk that
the budget may not be passed until a new ruling coalition is put together. The
problem is that may take a year. The country may go broke in the meantime, and
that type of financial crisis may be the only thing that will move the elite to
deal with the issue instead of their own political disputes.

In the last few months local officials have complained that
they are running out of money, while people have taken to the streets because
the budget is so behind schedule. In May, Maysan,
Dhi Qar, Basra, Diyala,
Ninewa, and Salahaddin all complained that they were running out of money. Maysan
said they had to suspend paying public workers’ their salaries. Dhi Qar stated
it had no means to buy fuel or pay for maintenance work. Ninewa
claimed it had to borrow huge amounts of money to keep it afloat. Diyala told
the press it had to lay people off. Finally, almost all of them had to halt
most if not all of their development projects because they could not pay
companies for their work. A member of parliament’s legal committee told
Al Mada that might put the government in a vulnerable position because
firms could start suing over breach of contract if they were not paid
eventually. May
11 3,000 people protested in Basra about the lack of services. One of their
claims was that delays in funding and the budget not being passed had held up
projects for years. Back in April the Basra provincial council held
a special session calling on Baghdad to pass the budget, while people gathered in Diwaniya demanding the same
thing. Basra officials went as far as to threaten
to take over the South Oil Company, which is responsible for the vast
majority of Iraq’s oil exports, if they could not count on the central
government for money. The governorates always have problems spending their
funds because they receive it so late from Baghdad. Any unspent money has to be
returned by the end of the year. The way things are going they may only have a
few weeks left in 2014 to execute their budgets meaning they will achieve
little of substance.

The budget has been held up due to Prime Minister Nouri
al-Maliki’s political and economic disputes with the Kurdistan Regional
Government and Speaker Osama Nujafi. On January
15, 2014 the cabinet approved its draft budget. This was done despite the
Kurdish ministers boycotting the session. The Kurds were absent because the
budget calls for them to export 400,000 barrels a day in oil or have their
money cut. This immediately set off a war of words between the two sides with
escalating threats blaming each other for the situation. The premier said that
the Kurds needed
to fulfill their obligations to the state otherwise why should they get
their share of the budget. To push the matter, Maliki cut off payments to the
Kurdistan Regional Government (KRG). The Kurds retaliated by refusing to show
up to parliament. They didn’t have the numbers to stop a quorum being formed on
their own, but that was achieved when Speaker Osama Nujafi’s Mutahidun party
joined them. Nujafi complained
about the prime minister’s military campaign in Anbar, but he also has an
alliance with President Massoud Barzani’s Kurdistan Democratic Party (KDP) due
to their mutual patron Turkey. This became a major issue in the run up to the
April 2014 elections. Now that those have been completed the parties main
priority is creating a new government. That means that the budget is being put
on the back burner. The preservation of the lists’ political power and
positions are more important than the financial health of the country.

It may take a year for a new government to be formed, which
will put a huge amount of stress upon the country’s economy if the budget is
not passed before then. For now the government is running off of the unspent
funds from the 2013 budget. That is considerable because only around 30% of the
investment budget is spent and about half the provinces spend 50% or less of
their money as well. However as the months drag on you can expect the
governorates to complain more that they are unable to carry out their duties
due to a lack of money. The summer is usually protest time in Iraq, so it is
not unforeseeable that this will become a major issue for the public as well as
the two protests have foreshadowed. There’s a good chance that the parties will
not deal with the issue until it becomes a crisis. Until then the ruling elites
will hold budget hostage.

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About Me

Musings On Iraq was started in 2008 to explain the politics, economics, security, culture and history of Iraq via original articles and interviews. If you wish to contact me personally my email is: motown67@aol.com